Personal health and wellness is one of the many secular tailwinds for healthcare companies. Shareholders who bet on the industry have been rewarded lately as healthcare stocks have returned 40.7% over the past six months, topping the S&P 500 by 23.9 percentage points.
Nevertheless, investors should tread carefully as the sector is heavily regulated, and businesses can be negatively impacted if the rules change. On that note, here is one healthcare stock boasting a durable advantage and two that may face trouble.
Two Healthcare Stocks to Sell:
Omnicell (OMCL)
Market Cap: $1.58 billion
Driven by the vision of an "Autonomous Pharmacy" with zero medication errors, Omnicell (NASDAQ: OMCL) provides medication management automation and adherence tools that help healthcare systems and pharmacies reduce errors and improve efficiency.
Why Is OMCL Risky?
- Sales trends were unexciting over the last five years as its 4.8% annual growth was below the typical healthcare company
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
- ROIC of 0.1% reflects management’s challenges in identifying attractive investment opportunities
Omnicell is trading at $34.62 per share, or 18.7x forward P/E. Dive into our free research report to see why there are better opportunities than OMCL.
Lantheus (LNTH)
Market Cap: $6.54 billion
Pioneering the "Find, Fight and Follow" approach to disease management, Lantheus Holdings (NASDAQGM:LNTH) develops and commercializes radiopharmaceuticals and other imaging agents that help healthcare professionals detect, diagnose, and treat diseases.
Why Do We Think Twice About LNTH?
- 4% annual revenue growth over the last two years was slower than its healthcare peers
- Sales are projected to tank by 1.2% over the next 12 months as demand evaporates
- Costs have risen faster than its revenue over the last two years, causing its adjusted operating margin to decline by 9.9 percentage points
Lantheus’s stock price of $100.20 implies a valuation ratio of 17.3x forward P/E. Check out our free in-depth research report to learn more about why LNTH doesn’t pass our bar.
One Healthcare Stock to Watch:
Cardinal Health (CAH)
Market Cap: $53.98 billion
Operating as a critical link in the healthcare supply chain since 1979, Cardinal Health (NYSE: CAH) distributes pharmaceuticals and manufactures medical products for hospitals, pharmacies, and healthcare providers across the global healthcare supply chain.
Why Does CAH Stand Out?
- Enormous revenue base of $254.2 billion gives it economies of scale and advantages over new entrants due to the industry’s regulatory complexity
- Share buybacks catapulted its annual earnings per share growth to 14.6%, which outperformed its revenue gains over the last five years
At $233.46 per share, Cardinal Health trades at 18.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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